Your co-worker correctly used a 1000-period model to estimate the value of the following European call...

 

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Your co-worker correctly used a 1000-period model to estimate the value of the following European call option: S = 45 . X = 50 r 0.0324052% h 4.9170655% 1=-4.6866213% T = 3.6 years where r is the simple risk-free rate per period. h and I are the possible high and low returns that the underlying stock might have in a given period. The underlying stock pays no dividends You need to revalue the option. You decide to value the option using Black-Scholes. a) What is the Black-Scholes value of the option? b) What are the exact contents of the replicating portfolio? Your co-worker correctly used a 1000-period model to estimate the value of the following European call option: S = 45 . X = 50 r 0.0324052% h 4.9170655% 1=-4.6866213% T = 3.6 years where r is the simple risk-free rate per period. h and I are the possible high and low returns that the underlying stock might have in a given period. The underlying stock pays no dividends You need to revalue the option. You decide to value the option using Black-Scholes. a) What is the Black-Scholes value of the option? b) What are the exact contents of the replicating portfolio?

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To value the option using the BlackScholes formula we need the following inputs Stock price S 45 Str... View the full answer